Specialty Food Magazine is the leading publication for retailers, manufacturers and foodservice professionals in the specialty food trade. It provides news, trends and business-building insights that help readers keep their businesses competitive.
Issue link: https://www.e-digitaleditions.com/i/375622
FROM THE PUBLISHER What Investors Want from Specialty Foods HAVE A COMMENT? Visit specialtyfood.com/ ccrocker/investors S pecialty food producers haven't tradition- ally inspired investor interest, because they don't generally provide the quick returns that investors want. Today, however, the ability of small, agile producers to bring innovative prod- ucts to market is fueling a high level of activity in specialty food investment and acquisition. Large consumer packaged goods marketers have trolled the aisles of the Fancy Food Show for years to track trends and identify new product ideas. Recognizing that thousands of smaller companies can develop products faster than they can, they are now looking to acquire brands with some trac- tion and growth potential, often keeping them as indepen- dent business units. It sounds like good news for those looking to sell or grow their business. Investors don't aspire to be in your busi- ness but rather to get out at a profit, so they invest in compa- nies that can grow or be acquired quickly, offering a relatively fast and lucrative exit. But it's not for everyone. Taking on investment can dramatically change the na- ture of your business. Investors will hold you accountable to their goals as shareholders, almost always centered on growth. If you find a good match, you can accomplish great things. When your goals differ from those of your share- holders, it can make for some rocky roads ahead. If you're in specialty foods because it affords you the op- portunity to do what you love, or because you want to build a commercial legacy for your family, you may want to steer clear of outside investment. If you view your business as a path to wealth or early retirement, however, here is what professionals say they are looking for in an attractive business: • A leader in an expanding category. Angel investors will put money into early-stage businesses with leadership potential and a sound foundation. • Products that have velocity within a frame of ref- erence. Think everyday usage. (Hot categories: beverages and snacks.) • Increasing same-store sales. • Products with solid gross margins, or high poten- tial to have them. • A solid, scalable business infrastructure. • For larger investment groups: sales in excess of $5 million. For companies with less than $1 mil- lion in revenues, look to angel investors. If you meet the criteria above, chances are that you can make a compelling case for investors. You will, however, be in a much better position to evaluate your options if you aren't already almost out of cash. With all of this activity going on, should we be con- cerned about changes in competitive dynamics or about consolidation imploding the industry? I don't think so. With its diverse base of businesses, growing consumer exploration, and the creative, passionate people behind its products, the specialty food realm can long remain a fertile ground for entrepreneurs to pursue their dreams. Chris Crocker Senior Vice President, Content & Media ccrocker@specialtyfood.com FALL 2014 5